Warehouse insurance

We usually insure your contents and stock together as one cover. That figure has to be the full cost of replacing everything on site: stock, racking, shelving, the office fit-out, computers, an unregistered forklift, the tools on the bench and the goods customers have left with you. For stock, that means what it would cost you to buy it again, counted at cost plus freight and duty, not what you sell it for.

In our experience, most owners are short without knowing it. The business grew a pallet and a power tool at a time, and nobody went back to the policy. We have seen claims come in underinsured because of it.

We take what is on your floor item by item and build the figure from what is there today.

The landlord's policy is there for the landlord's building. Your contents and stock are yours to insure. Your lease may put the fit-out on you to insure, but that does not settle which policy covers it. Check the policy definitions and the schedule as well, or you and the landlord can each think the other has it covered, and an item goes uninsured. If something is damaged, whoever has it insured usually pays to repair it first. Who pays building insurance on a commercial property goes through the split.

Most leases also ask for public liability, usually $20 million in the leases we hold, though the right limit depends on what your business does. When the landlord asks for proof, they want a certificate of currency, which records your cover when it is issued. Your schedule, wording and endorsements carry the full terms. We release yours once we have received your premium.

Your lease can also make you pay for damage your business does to the building, even when you did not see it happen. We often see tenants miss that their lease makes them service the air conditioning. Check both in your lease. The rest of what a lease asks of you is in insurance requirements in a commercial lease.

If you own the warehouse, the building sits under commercial property insurance, and commercial landlord insurance adds the rent and your liability when you lease it out.

Public liability can sit inside a business insurance package with your contents and stock, and we set the limit to what your lease and your business need.

On the policies we place, your contents and stock sit under an underinsurance clause, also called an average clause, usually set at 80 per cent; the percentage on your own policy is the one that counts. It compares the total you insured at the premises with what everything there was really worth.

• On a partial loss, if your figure was under 80 per cent of what everything was really worth, the insurer can pay only part of the claim, using the calculation in your policy.
• On a total loss, the payout stops at the limit your sum insured sets.

Your own policy sets how that calculation works, and whether it applies to a smaller claim at all. Our guide sets out how the underinsurance clause works, with figures.

If your stock figure turns out short, you can raise it with us before renewal comes round. Tell us when you find it, and we can ask the insurer what would need to change and what that would mean for future claims. We ask them to confirm how an agreed change affects the calculation. At renewal we check the stock figure again.

Business interruption pays for the indemnity period you choose, and the wording will not correct a short one. In our experience, a short period is the gap we find most often on a warehouse business's old policy. A big warehouse can take 24 months to rebuild.

We strongly recommend a period of 24 or 36 months, depending on your business. Our minimum is 18 months. Most policies also give this cover its own 80 per cent clause, so a figure set too low can be cut back.

Theft is its own section on these policies, separate from your contents cover. It is built around forced entry: a smashed door, a cut lock, someone hiding inside.

On the policies we place, theft from inside the building with no sign of a break-in is paid only up to a cap, usually $20,000. Most let you choose a higher cap, some fix it at a flat $20,000, and some set it lower when your contents figure is under $20,000, unless you choose more. On some policies that cover does not reach your stock at all, and on others it turns on how your contents and stock are listed. Whatever is stolen above the cap is yours to carry. Stock found short at a stocktake, with no theft you can point to, is excluded on most.

Theft by your own staff catches warehouse businesses out too. On the policies we place it is excluded, then put back in for only $5,000. It must be discovered within 45 days, and you usually have to name the employee. Fuller cover is usually an optional extra.

We check the theft cap against what your stock is worth to a thief, and whether anything you hold, such as tobacco or alcohol, needs listing by name.

If you carry more stock at busy times, tell us how high it can get. Some policies automatically increase stock cover for certain periods, such as Christmas and Easter, but the dates, amount and record requirements differ. If your real peak runs past the increase, the extra is yours to carry. We can check whether that increase is enough.

How far the lift goes is in our guide to the seasonal stock clause.

Tools that go out in the van need the portable property section, an optional part of the policy separate from contents. Items not listed are capped at a few thousand dollars each, so anything worth more needs listing by name. Machines that work off-site belong on Plant and Equipment Insurance.

Goods you hold for other businesses can sit in your contents and stock figure, because on the policies we place contents includes property you are responsible for. Public liability may separately cover your legal liability for damage to goods in your care, subject to the policy's conditions and limit. That is different from insuring the goods themselves. Its limit for goods in your care is usually $250,000 for any one occurrence, or more if your policy lists a higher figure. We ask what you hold and for whom, and set that cover up to match. Goods you move for others belong on cargo cover or Transport Operators Insurance.

1. We ask about your business before the warehouse: what you do and what you most need protected.
2. We build the contents and stock figure from what you hold, and ask about your real peak.
3. We compare the cover across the insurers we place with and explain the differences that matter to you.
4. You decide which policy we place, and we arrange it.

After a fire, a storm or a theft, the claims manager deals with the insurer for you and keeps you informed, so you can get on with reopening. We explain what information you need to provide. The insurer decides the claim, and if a decision misses cover your policy gives you, we take it up with the insurer.